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Parcl is a new blockchain startup that combines cryptography with real estate. It’s a platform that allows you to invest in the price movement of popular real-world neighborhoods without owning property.
The company says its goal is to address structural inequality in the housing market by giving more investors access to high-value real estate. Blockchain technology enables Parcl to digitize real estate markets and make property values tradable.
Unlike traditional real estate investing, investors do not use property in Parcl as collateral to secure an asset. Instead, Parcl creates value by tracking the appreciation of real estate markets as measured by the price per square foot of properties located within specific neighborhoods.
This article dives into what Parcl is, how digital real estate investing works, and key information you’ll want to know before deciding whether this is the right investment opportunity.
Characteristics – 6
Rates – 7
Minimum investment – 5
Liquidity – 5
Risk management – 1
Availability – 1
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Parcl allows you to invest in high value real estate using blockcahin technology without buying the underlying asset.
pros
- There is no minimum investment so that all investors can access great value properties
- Investors can participate in hot markets without owning property in those markets
- By using the Solana blockchain, Parcl keeps gas rates low
against
- Investing in digital real estate square footage is highly speculative
- Parcl is in the early stages of release with limited user access
- Parcl has not yet published its white paper
What is Parcl?
Parcl is a digital real estate protocol based on the Solana blockchain. It allows users to invest in specific geographic real estate markets without owning property in those markets. Investors benefit by capturing value from price movements rather than directly from property value appreciation.
Parcl measures the value of a geographic area by the price per square foot of property in that area. This metric is digitized and collected in the Parcl-owned Parcl Price Index. This index changes dynamically as the market changes, making real estate values a commodity market.
How does Parcl work?
Parcl offers high-value areas a digital representation of the price per square foot of properties in that neighborhood. These values are displayed in “parcls”. The value of a plot is based on the market appreciation of each neighborhood.
Investors benefit from property value appreciation without ownership
Parcl allows anyone to invest in increasing property value without owning a home in that area. When real property values in that neighborhood increase, investors’ Parcl portfolio increases. Conversely, your portfolio would decrease if property values declined.
Parcl investors are not actually investing in real estate. Instead, they are investing in the likelihood of future property value appreciation in certain areas. Parcl markets properties in popular neighborhoods on a digital index where property values are likely to rise. Users are essentially investing in the likelihood of this happening.
Parcl tokens are considered a high-risk investment because they are not backed by physical ownership. Instead, they are a tokenized derivative of existing real estate markets.
Should you take the opportunity? >>> Investment risk 101
Turn neighborhoods into commodity markets
Parcl creates tokens that turn different geographic real estate markets into digital commodities, giving geographically dispersed investors access to hot real estate markets. This is similar to how physical commodities such as corn or wheat are traded in futures markets.
Parcl is a highly speculative platform as portfolio growth is based on future expected returns. This is similar to investing in the future performance of athletes. Investors can do this by betting on an athlete through a sports betting platform or by purchasing a collectible linked to that athlete, such as a rookie sports card.
Investing with Parcl is similar in that both do not have an underlying asset backing them. An injury or failure to meet expectations could devalue a sports-related investment. Likewise, a decrease in the collective value of a neighborhood could decrease the return on the investment in Parcl.
More information about the risk >>> What are the risks of investing in real estate?
Investors facing crypto assets as collateral
Parcl’s investments use crypto as collateral, which investors provide upfront. They deposit the guarantee in a digital vault. Investors essentially borrow plots of the vault, which are then minted as digital tokens that represent a portion of the Parcl price index. As the value of the index increases, Parcl investors pay off their debt and contribute capital to their park.
The way Parcl calculates the value adds risk to the investment. Parcl’s price index is based on the aggregate price per square foot of all properties in a neighborhood. Therefore, a change in the value of a few key properties could have a significant impact on the valuation of the entire parcel.
Read more >>> What is the best way to determine the value of my property?
Parcl tokens are interchangeable
Aside from owning parcl tokens in specific neighborhoods and hoping those neighborhoods appreciate, there are other ways to make money on the platform.
You can trade Parcl tokens on the decentralized serum exchange powered by Solana. This allows investors to benefit from price arbitrage as the value of specific parcl tokens increases. Parcl tokens can also be staked on Parcl’s Automated Money Maker, allowing token holders to earn passive income from trading commissions.
What are the rates and limits?
Parcl does not require a minimum investment to get started. However, there are some barriers to entry.
First, Parcl is in the early stages of development. Currently, only HOA NFT project token holders can mint parcels and thus access the platform.
Also, you cannot invest in Parcl without first depositing crypto. Investors put their cryptocurrency as collateral in a vault maintained by the Parcl protocol. From there, an investor can borrow parcls and manage their portfolio.
There is no fee to begin with, but Parcl takes the fees out of the security balance of the vault when the debt is paid off. Transactions on the Solana blockchain also incur gas fees. Solana market demand determines these rates, which are independent of Parcl.
Is Parcl legit?
Possibly, but it’s too early to tell. Parcl launched the Parcl protocol mainnet for HOA NFT holders in July 2022. There is currently no white paper for potential investors to read and their HOA Roadmap is not updated to reflect timelines for future releases.
According to Crunchbase, Parcl has received $11.5 million in venture capital funding since it was founded in 2020. The most recent fundraising round took place in May 2022. Interested investors can join the channel Parcl Discord to ask questions and get updates on releases.
How to start investing
Before you can start investing in Parcl, you must own one of the 7,777 NFT HOAs. You can buy them on secondary exchanges like OpenSea.
However, even if you get an NFT HOA, you may not be able to start investing yet. According to Parcl’s Terms of Use, individuals or entities resident in the United States may not use the Platform at this time:
“The Services are not offered to persons or entities that are residents of, citizens of, located in, incorporated in, or domiciled in the United States of America (collectively, “U.S. Persons “)”.
This includes using a virtual private network (VPN) to mask your geographic location.
Alternatives to Parcl
Parcl is one of many emerging blockchain (and non-blockchain) solutions that allow users to reap the benefits of investing in real estate in hot markets without owning any property. They all aim to solve the same problem: increasing access to real estate investment.
very high
Lofty is a marketplace that connects owners who want to sell their properties with buyers. With Lofty, investors invest in real rental properties using the Algorand blockchain.
Buyers are individual investors who buy fractional shares of a property. You can trade the tokenized shares on the blockchain. For $50, investors can start investing in income-producing real estate without committing to owning one. Investors earn rental income and benefit from property value appreciation.
Read more >>> What is fractional share investing?
Fundraising
Fundrise is a real estate investment company that allows investors to pool their investments to buy shares of commercial and residential property. With Fundrise, you own fractional shares in a portfolio backed by tangible real estate assets.
At $10, Fundrise has one of the lowest minimum investments in the real estate crowdfunding industry. This could make it a great option if you want to dive into real estate investing without making a huge capital commitment.
Read more >>> 2022 Fundraising Review
My personal view of Parcl
To be honest, Parcl feels a lot more like playing than investing in me right now. Investors bet on the prospect of future real estate appreciation in the same way that someone might bet on their favorite team reaching next year’s Super Bowl.
There is no tangible real estate asset behind a Parcl investment making it very risky. In fact, investors seem to be paying to play with Parcl. Cryptocurrencies locked as collateral are also used to pay off debt incurred for the purchase of plots. This turns your collateral into debt, making it difficult to withdraw if your “investment” doesn’t pan out.
There is no doubt that crypto-backed real estate investment opportunities will continue to grow. Some of these opportunities will be entirely digital, while others, like Lofty, will integrate crypto to invest in physical properties. I think many of these opportunities are still early days, and it might be better to wait and see where things go before investing in this space.
My best advice: Be patient and manage your expectations. Investigating new crypto investment opportunities can be a great way to learn new platforms while developing a new investment strategy. But betting on an unproven platform to be the next money maker is probably more risky than it’s worth. Invest only as much as you are willing to lose.
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